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CHAPTER V

STAMP DUTY AND

REGISTRATION FEES

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EXECUTIVE SUMMARY

Increase in taxcollection

In 2011-12 the collection of stamp duty andregistration fees increased by 14.39per cent.

Very low recovery by

the Department

against the

observations pointed

out by us in earlier

years

During the period 2006-07 to 2010-11, we had

pointed out undervaluation of properties,

misclassification of documents, incorrect exemption

etc., with revenue implication of ` 522.80 crore in

2,208 cases. Of these, the Department/Government

had accepted audit observations in 693 cases

involving ` 142.00 crore and had since recovered

` 2.62 crore in 316 cases. The recovery position

(1.85 per cent) as compared to acceptance ofobjections was very low.

Results of audits

conducted by us in

2011-12

In 2011-12, we test checked the records of 334

offices relating to District Registries and Sub-

Registries and found preliminary audit observations

involving non/short levy, misclassification of

documents, under valuation of properties, incorrect

exemption etc., of` 84.29 crore in 362 cases.

The Department accepted underassessments and

other deficiencies of`

46.97 crore in 165 cases, ofwhich 42 cases involving ` 46.45 crore were pointed

out during the year and the rest in the earlier years.

An amount of` 2.09 crore was realised in 147 cases.

What we have

highlighted in this

Chapter

In this Chapter, we present illustrative cases

involving tax effect of` 126.29 crore selected from

observations noticed during our test check of records

relating to assessment and collection of stamp duty

and registration fees in the offices of District

Registries and Sub- Registries, where we found that

the provisions of the Acts/Rules were not observed.

It is a matter of concern that similar omissions have

been pointed out by us repeatedly in the Audit

Reports for the past several years, but the

Department has not taken corrective action.

CHAPTER V

STAMP DUTY AND REGISTRATION FEES

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Audit Report (Revenue Sector) for the year ended 31 March 2012

132

Our conclusion The Department needs to improve the internal

control system including strengthening of internal

audit so that weaknesses in the system are addressed

and omissions of the nature detected by us are

avoided in future.

It is also required to initiate immediate action to

recover the stamp duty and registration fees etc.,

pointed out by us, especially in those cases where

audits contention is accepted.

In cases where the audit observations relating to

unregistered leases emanated from cross verification

of data with other departments/authorities, it is

recommended that an effective mechanism be put in

place to coordinate with all the Government/semi-

Government Departments/organisations to get the

details of leases /agreements executed on a periodic

basis.

In respect of non registration of motor vehicle

hypothecation documents, clearly the Transport

Department is best placed to track hypothecation of

vehicles, since it is responsible for making necessary

entries regarding hypothecation in the vehicles

Registration Certificate (RC). We, therefore,

recommend that the Registration and Stamps

Department and the Transport Department shouldjointly evolve a mechanism whereby the Transport

Department collects the stamp duty as an agent of

the Registration and Stamps Department.

It is also recommended that District Registrar may

take up inspection of public offices periodically, so

as to minimize the leakage of revenue.

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Chapter V Stamp Duty and Registration Fees

133

5.1 Tax administration

The Registration and Stamps Department is responsible for administration of

the Indian Stamp (IS) Act, 1899 and the Registration Act, 1908, as amended

from time to time by the Union and State legislations. The Department is

primarily entrusted with registration of documents and is responsible fordetermining and collecting stamp duty and registration fees on registration of

various documents/instruments by the general public. The Commissioner and

Inspector General (IG), Registration and Stamps exercises overall

superintendence over all the registration offices in the State. He is assisted by

the region-wise Deputy IGs. The District Registrar (DR) is incharge of the

district and superintends and controls the Sub-Registrars (SR) in the district

concerned.

5.2 Trend of receipts

Actual receipts from Stamp Duty and Registration Fees (SDRF) during the

years 2006-07 to 2010-11 along with the total tax receipts during the same

period is exhibited in the following table and graphs.

Table 5.1: Receipts from Stamp Duty and Registration Fees

( ` in crore)

Year Budget

estimates

Actual

receipts

Variation

excess (+)/

shortfall (-)

Percentage

of

variation

Total tax

receipts

of the

State

Percentage

of actual

receipts vis-

a-vis total

tax receipts

2007-08 3,750.00 3,086.06 (-) 663.94 (-) 17.71 28,794.05 10.72

2008-09 4,537.50 2,930.99 (-) 1,606.51 (-) 35.41 33,358.29 8.792009-10 3,224.00 2,638.63 (-) 585.37 (-) 18.16 35,176.68 7.50

2010-11 3,546.00 3,833.57 (+) 287.57 (+) 8.11 45,139.55 8.49

2011-12 4,240.00 4,385.25 (+) 145.25 (+) 3.43 53,283.41 8.23

Graph 5.1: Budget estimates, actual receipts and total tax receipts

0

10

20

30

40

50

60

2007-08 2008-09 2009-10 2010-11 2011-12

(```i

n'

000

crore)

Budget estimates Actual receipts Total tax receipts

It is evident from the above table and graph that revenue contribution from

Stamp Duty and Registration Fees to the total tax receipts of the State has been

almost stable for the last four years. Variation in the Budget Estimates and

Actual Receipts was minimum in the year 2011-12.

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5.3 Cost of collection

Figures of gross collection in respect of the stamp duty and registration fees,

expenditure incurred on collection and the percentage of such expenditure to

gross collection during the years 2009-10, 2010-11 and 2011-12, along with

the relevant all India average percentage of expenditure on collection to grosscollection for the previous year, are mentioned below:

Table 5.2: Cost of collection of Stamp Duty and Registration Fees

(` in crore)

Head of

revenue

Year Gross

collection

Expenditure

on collection

of revenue

Percentage

of cost of

collection

to gross

collection

All India

average

percentage for

the previous

year

Stamp duty and

registration fees

2009-10

2010-11

2011-12

2,638.63

3,833.57

4,385.25

87.75

94.99

101.67

3.33

2.48

2.32

2.77

2.47

1.60

Although the cost of collection has marginally reduced this year as compared

to the previous year, it is much higher than the All India Average cost of

collection of the previous year.

5.4 Impact of Local Audit

During the last five years, audit had pointed out misclassification of

documents, under valuation, short levy of stamp duty and registration fee etc.,

with revenue implication of ` 522.80 crore in 2,208 cases. Of these, the

Department/Government had accepted audit observations in 693 casesinvolving ` 142 crore and had since recovered ` 2.62 crore. The details are

shown in the following table:

Table 5.3: Impact of Local Audit of Stamp Duty and Registration Fees

(` in crore)

Year No. of

units

audited

Amount objected Amount accepted Amount recovered

No. of

cases

Amount No. of

cases

Amount No. of

cases

Amount

2006-07 302 329 28.33 68 1.33 44 0.25

2007-08 303 449 20.45 61 0.76 36 0.15

2008-09 294 508 47.98 126 6.89 49 0.83

2009-10 276 590 275.20 63 6.45 48 0.412010-11 270 332 150.84 375 126.57 139 0.98

Total 1445 2208 522.80 693 142.00 316 2.62

Recovery of only ` 2.62 crore (1.85 per cent) against the money value of

` 142 crore relating to accepted cases during the period 2006-07 to 2010-11

highlights the failure of the Government/Department machinery to act

promptly to recover the Government dues even in respect of the cases

accepted by them.

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5.5 Working of internal audit wing

A separate wing for internal audit team headed by Sub-Registrar (Market

value (MV) and Audit)/District Registrar (MV and Audit) would draw up the

audit programme very month and conduct audit of offices of sub-Registrars.

DIG concerned would supervises the progress of audit and monitor thecollection of deficit stamp duty in the finalised audit paras and disciplinary

action against responsible registering officers, who caused the loss of revenue

due to their deliberate lapses.

It was reported (October 2012) that the audit observations mainly relate to

undervaluation of documents, due to wrong adoption of guideline values.

5.6 Results of Audit

Test check of the records of 334 offices of district registrars and sub-registrars

conducted during the year 2011-12 revealed preliminary audit findingsinvolving non/short levy of stamp duty and registration fees of` 84.29 crore in

362 cases, which broadly fall under the following categories:

( ` in crore)

Sl.

No.

Category No. of cases Amount

1. Non/short levy of stamp duty and registration

fees

232 64.76

2. Non disclosure of facts/Misclassification of

documents

67 18.17

3. Undervaluation of properties 32 0.95

4. Incorrect exemption 9 0.065. Other irregularities 22 0.35

Total 362 84.29

During the year 2011-12, the Department accepted underassessments and

other deficiencies of` 46.97 crore in 165 cases, of which 42 cases involving

` 46.45 crore were pointed out during the year 2011-12 and the rest in earlier

years. Out of this, an amount of` 2.09 crore in 147 cases was realised during

the year.

A few illustrative cases involving ` 126.29 crore are mentioned in the

succeeding paragraphs. These include cases which came to notice duringaudit of records during the year 2011-12 as well as those which came to notice

in earlier years, but which could not be included in the previous years reports.

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5.7 Audit observations

During scrutiny of the records in the offices of DRs and SRs, we observed

several cases of non-observance of the provisions of the Acts/Rules, resulting

in non/short levy of duties and fees as mentioned in the succeeding paragraphs

in this Chapter. These cases are illustrative and are based on a test checkcarried out by us. We point out such omissions in audit each year, but not

only do the irregularities persist; these remain undetected till an audit is

conducted. There is a need for the Government to consider directing the

Departments to improve the internal control system, including strengthening

internal audit so that such omissions can be avoided, detected and rectified.

5.8 Non levy/Short levy of stamp duty on lease deeds

5.8.1 Non-realisation of stamp duty and registration fees on un-

registered lease deeds

5.8.1.1 We noticed

(April 2012) from the

information obtained

from Andhra Pradesh

State Road Transport

Corporation (APSRTC),

Hyderabad that

APSRTC entered into a

lease agreement and

authorisation agreement

with Soma HyderabadCity Centre Pvt.

Limited and Soma

SVEC Consortium for

leasing out land to the

extent of 9.14 acres on

Build Operate and

Transfer (BOT) basis

for a period of 33 years

on 21 August 2008.

Subsequently, an

amendatory agreementto the lease agreement

was executed on 14

October 2009, revising

the term lease as authorisation and lease rentals as premium.

However, this amendment did not make any change in the liabilities towards

stamp duty and registration fee. As per the agreement conditions, the lessee

had paid upfront authorisation premium of ` 95 crore and non refundable

Development Fee of ` 6 crore. Further, the lessee had to pay annual

premiums of a total amount of ` 2,055.59 crore for the entire authorisation

period of 33 years on quarterly basis. The lessee was also to effect

As per Article 31 (c) of Schedule 1-A to the

Indian Stamp (IS) Act 1899, where the lease

is granted for a fine or premium or for money

advanced in addition to rent reserved, stamp

duty is leviable at fiveper centof the market

value of the property or the amount or value

of such fine or advance, as set forth in the

lease whichever is higher, in addition to the

duty which would have been payable on such

lease, if no fine or premium or advance hadbeen paid or delivered. Further, under

Article 31(d) of Schedule IA to the Act ibid,

where the lessee undertakes to effect

improvements in the leased property and

agrees to make the same to the lessor at the

time of termination of lease falling under

clauses (a), (b) or (c), stamp duty is also

leviable at 5 per cent on the value of the

improvements contemplated to be made by

the lessee as set forth in the deed in addition

to the duty chargeable under clauses (a), (b)

or (c).

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improvements to an extent of 1,25,630 sq.mt. in the leased property and was to

transfer the same to the lessor at the time of termination of lease.

All these agreements were not registered as per the provisions of the IS Act,

and were executed on non-judicial stamp paper of ` 100 each. Audit cross

verified the fact of non-registration with the Sub-registrar concerned andAPSRTC.

Non registration of these documents resulted in non-realisation of Stamp Duty

and Registration fee amounting to ` 45.14 crore.

After this was pointed out the case, the Government stated (January 2013) that

they had taken up (June 2012)the matter of collection of stamp duty with the

Managing Director, APSRTC to get the documents validated.

5.8.1.2 We noticed

(March 2012) from theinformation obtained from

Andhra Pradesh Housing

Board (seven cases),

Andhra Pradesh Tourism

Development Corporation

Limited (five cases), and

five other lessors1

that 18

license agreements/

authorisation agreements

/memorandum of

understanding for transferof immovable property

were entered into

(between April 2004 and

April 2011) for a period

ranging from three years

to 35 years for

development and maintenance of scheduled properties on payment of licence

fee/additional development premium periodically. It was noticed (March

2012) by audit that these agreements were executed on non-judicial stamp

paper of` 100 in each case and were not registered as per the provisions of IS

Act. The fact of not registering these documents was also confirmed from theSub Registrars concerned. Failure to insist upon registration of these lease

deeds by the lessors resulted in non-realisation of stamp duty and registration

fees of` 8.30 crore.

1

Osmania University, South Central Railway, AP State Finance Corporation, HyderabadMetropolitan Development Authority (2 cases) and AP Industrial InfrastructureCorporation Ltd.

As per Section 2 (16) of the IS Act, leaseincludes any writing on an application for a

lease intended to signify that the

application is granted.

Section 17 (1) (d) of the Registration Act,

1908, stipulates that all leases of

immovable property are to be registered

compulsorily with effect from 1 April

1999. Stamp duty on lease deed is

chargeable at the rates prescribed for a

consideration equal to the amount or valueof fine, premium or advance in addition to

the amount of the average annual rent

reserved and on the basis of the term of

lease.

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In response to the audit observation, the Government replied (January 2013)

that the para pertains to the Tourism Department and they were being

addressed in the matter; the unit offices reported (July & August 2012)

recovery of` 0.59 lakh2.

5.8.1.3 Non levy of stamp duty and registration fees on distillery leases

We noticed (February 2012) during test check of the records of Commissioner

of Distilleries and Breweries, Hyderabad that two companies had sub leased(April 2010 and April 2011) their distilleries without registering the lease

deeds as required under the above provisions. However the Excise

Department had neither insisted upon registered documents of sublease nor

were their licenses cancelled. The violation of the provisions resulted in non

levy of stamp duty and registration fee of` 7.22 lakh.

2 AP Housing Board (2 cases).

As per Article 31 a (ii) of Schedule IA to IS Act, where the lease

purports to be for a term of not less than one year but not more than

five years, stamp duty is leviable at two per cent of the whole

amount payable or value of the average annual rent reserved

whichever is higher up to 13 May 2010 and at 0.4 percent of the total

rent payable thereafter. Section 17 (1) (d) of the Registration Act,

1908 stipulates that all leases are to be registered compulsorily with

effect from 1 April 1999.

As per Rule 11 of AP Distillery (Manufacture of IMFL other than

beer and wine) Rules, 2006, the Commissioner of Prohibition and

Excise may permit the license holder of a distillery to sub-lease the

manufactory/distillery on payment of a sum equal to 10 per centof

the proportionate license fee. Sub rule 1 thereunder provides that sub

lease deed between the licensee and the proposed sub lessee shall be

registered on a non judicial stamp paper of requisite value as per

provisions of Indian Stamp Act, within 15 days from the grant of

permission for sub lease.

As per clause (vii) of Rule 11(1), both the licensee and sub-lesseeundertake to furnish duly registered lease deed within 15 days from

the date of grant of permission of sub-lease. An undertaking is to be

furnished on a non judicial stamp paper of` 100/- under rule 11(1)

(vii)(d) that both the licensee and sublease holder agree to the

condition that the license was liable to be cancelled for any lapse

contravening the provisions of any rule or any conditions of license.

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After we pointed out the case, Government replied (January 2013) that the

para pertains to the Prohibition and State Excise Department and they were

being addressed in the matter.

Since the non registration of lease deeds has the consequent effect of loss

of revenue towards stamp duty and registration fee, it is suggested thatcoordinated efforts be made by the Registration and Stamps Department

with the relevant lessors concerned to plug the revenue leakage. In

addition the Registration and Stamps Department may consider setting

up a mechanism to coordinate with all the Government/semi-Government

Departments/organisations to get the details of leases executed on a

periodic basis.

5.8.2 Short levy of stamp duty on Build Operate and Transfer lease

agreements

We noticed(September 2011)

during test check of

the records of District

Registry (DR),

Visakhapatnam that a

lease deed was

executed and

registered in

November 2010 by

the lessor3

in favour

of the lessee4

, leasingthe property for a

period of 32 years

effective from

2 June 2005. As the lease period exceeded 30 years, stamp duty is leviable at

five per centon the market value of property under lease as declared by the

party or 0.8 per cent on the total rent payable on such lease, whichever is

higher. However, the registering officer levied stamp duty at 0.8per centon

total rent payable for 32 years even though the market value of the property

on the date of presentation was higher and hence duty chargeable was

5 per centon the market value. This resulted in short levy of stamp duty of

` 1.70 crore.

3 APSRTC.4 M/S Chandana Brothers, Visakhapatnam.

As per Article 31 a (vi) of Schedule I-A to the

IS Act, where a lease purports to be for a period

in excess of thirty years or in perpetuity or does

not purport to be for a definite period, stamp

duty is chargeable at fiveper centon the market

value of the property under lease as declared by

the party or 0.8per centon the total rent payable

on such lease, whichever is higher. C&IG in his

memo (Registration and Stamps Memo No.S1/

12097/2009 dated 28 October 2009) clarified

that stamp duty as applicable on date ofpresentation of document is to be adopted.

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After we pointed the case, Government replied (January 2013) that

adoption of rate by audit as on the date of presentation of lease deeds isnot sustainable, since lease period had commenced and property was

handed over to the lessee on 02 June 2005;

the adoption of market value as on the date of execution of the deed asper market value guidelines is not sustainable, since the chargeability

was only on value declared by the parties but not on market value as

per Government notification.

The reply is not tenable as C&IG had clarified in his memo dated 28 October

2009, that stamp duty as applicable on the date of presentation of document

was to be adopted. Further, the Department had themselves adopted the

market value as on 2 June 2005 and not the value declared by the party

(lessee) while computing the chargeability of the deed.

5.9 Non-levy of stamp duty on vehicles registered with hypothecation

agreement

We noticed (February

2012) during the test check

of Form 20 relating to the

registration of vehicles and

the analysis of the data of

the office of Transport

Commissioner, that6,54,615 vehicles were

hypothecated to private

banks and other financial

institutions during the year

2010-11. Based on the

information furnished by

the private banks/financial

institutions, it was found

that in respect of 1,16,376

vehicles (18 per cent) the

documents were executedonly on ` 20/ 100 stamp paper, and stamp duty at 0.5 per cent was not

collected in terms of the provisions of IS Act. We found that other financial

institutions/banks were not levying the requisite stamp duty, but we do not

have assurance regarding the same. The loss to the State Government on

stamp duty was ` 50.37 crore for one year alone, assuming that the amount

hypothecated was 80 per cent of the vehicle cost.

As per Article 7(b) of Schedule I-A to the

IS Act, the pawn, pledge, or

hypothecation of movable property,

where such pawn, pledge, or

hypothecation has been made by way of

security for the repayment of money

advanced, or to be advanced by way ofloan or an existing or future debt, is

leviable with stamp duty at 0.5per centof

the amount secured subject to a maximum

of two lakh rupees, if such loan or debt is

repayable on demand or more than three

months from the date of the instrument,

evidencing the agreement. Further, every

instrument has to be properly stamped as

per the provisions of the IS Act.

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A para on non-levy of stamp duty on vehicles registered with hypothecation

agreement was printed in the CAGs Audit Report for the year ended 31

March 2011. In response, the Government had stated that the matter would be

pursued by the Stamps and Registration Department by exploring different

approaches. However, the same position continues to persist.

We also noted that there were differences among different banks/institutions

with regard to levy of such stamp duty on hypothecation agreements;

a) Nationalised banks like Canara Bank, State Bank of Hyderabad etcwere levying the stipulated stamp duty.

b) Private banks/Institutions such as Hinduja Leyland Finance and Indus

Ind Bank were not levying requisite stamp duty.

In addition to loss of revenue, such difference also amounted to discrimination

against nationalised banks and their customers, who were being charged thestipulated stamp duty, and undue favour in respect of other financial

institutions, who were able to get away with non-compliance with statutory

provisions.

Government (Revenue Department) replied (January 2013) that the para

pertains to the Transport Department and that they were being addressed in the

matter.

Clearly, the Transport Department is best placed to track hypothecation of

vehicles, since it is responsible for making necessary entries regarding

hypothecation in the vehicles Registration Certificate (RC).

We, therefore recommend that the Registration and Stamps Department

and the Transport Department should jointly evolve a mechanism

whereby the Transport Department collects the stamp duty as an agent of

the Registration and Stamps Department for collection of stamp duty on

vehicle hypothecation.

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5.10 Short levy of duties and fees due to non-disclosure of facts/

misrepresentation of facts

5.10.1 We noticed (June 2011)

during test check of the recordsof DR, Rangareddy that a sale

deed was executed in June

2010 by the vendor5

in favour

of the vendee6, conveying land

of 26.97 acres for a

consideration of ` 16.18 crorethrough bidding. It was

observed from the recitals of a

Development Agreement

executed earlier in November

2006 by the same parties inrespect of the same property

that the vendor specified the

total sale price of` 4.27 crorepayable by the developer/vendee which included cost of land (` 60 lakh per

acre) and development premium (` 3.67 crore per acre). However, the parties

suppressed the aspect of payment of development premium in the sale deed.

This resulted in short levy of duties and fees of` 9.40 crore. Further, penalty

of three times of the deficit stamp duty is also leviable for suppression of facts.

After we pointed out the case, Government replied (January 2013) that

the vendor did not receive any extra sale consideration towards the saidland and produced documentary evidence to this effect;

the vendor being a concern wholly owned by the Government, saleconsideration shown in the document was adopted as per the

provisions of Section 47 A of IS Act.

The reply of the Government is not tenable for the following reasons:

As per the provisions of transfer of Property Act, 1882, sale is inexchange for price paid or promised or part paid and part promised. In

this case, the development agreement entered into between the two

parties had been concluded through a sale deed and amount of

development premium was paid through development agreement itself

before conclusion of sale deed.

The reply given by the Government that the premium was not paid isnot correct as the fact of payment of` 213.50 crore (between October

2005 and July 2006) towards 50per centof the cost of land including

5 Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC).6 M/s Lanco Hills Technology Park Pvt. Ltd.

As per Section 27 of the IS Act, theconsideration, if any, the market value

of the property and all other facts and

circumstances affecting the

chargeability of any instrument with

duty or the amount of duty with which

it is chargeable, shall be truly and fully

set forth therein. Section 41 A(1)

provides for levy of penalty of three

times of the deficit stamp duty along

with the stamp duty short levied, for

suppression of facts with an intent toevade duty.

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development premium is evident (at para 2.2.1 of article 2) from the

development agreement executed by both the parties in November

2006.

As per C&IGs circular Memo No. MV3/16180/ 2004 dated 20 March2010, where the properties were acquired through public auction and

the rate was fixed by the Government, the sale consideration fixed

would prevail. As the fact of sale consideration fixed by the agency of

the state has not been truly and fully set forth in the sale deed, the sale

consideration specified in the development agreement fixed by the way

of auction would prevail.

5.10.2 We noticed

(June 2011) during test

check of the records of

DR, Rangareddy that a

sale deed was executedand registered in March

2011 by the vendor7

in

favour of a vendee8.

The registering officer

levied stamp duty and

registration fees of

` 11.88 crore on the

market value of

` 158.40 crore.

Cross verification of a lease deed executed earlier revealed that the samescheduled property had been leased out by the vendor to another lessee for a

period of nine years for a monthly rent of` 1.13 crore. The average annual

rent of this property was declared as ` 1 crore in the sale deed. Based on

monthly rent of` 1.13 crore, the average annual rent worked out to ` 13.56

crore and 18 times the average annual rent worked to ` 243.81 crore. Since 18

times the average annual rent was higher than the market value of the

property, stamp duty and registration fee were leviable on 18 times of the

annual rental value. The misrepresentation of the average annual rent resulted

in short levy of stamp duty and registration fee of ` 6.40 crore. Further,

penalty of three times of the deficit stamp duty is also leviable for suppression

of facts.

After we pointed out the case, the registering officer stated (June 2011) that

the matter would be examined.

7 M/s L&T Infocity Limited.8 M/s ENN ENN Corp Limited.

C&IG Registration and Stamps in his Memo

(C&IGs memo No. MV1/8184/93) dated 9

June, 1993 instructed that any one of the

following, whichever is higher, be adopted for

levying stamp duty and registration fees.

(i) consideration set forth in the document;

(ii) market value as declared by the party;

(iii) market value arrived at by the SubRegistrar on the basis of the guidelines and

the schedule of rates of construction;

(iv) eighteen times the annual rental value.

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We referred the matter to the Department in November 2011 and to the

Government in June 2012; their reply has not been received (Janaury 2013).

5.10.3 We noticed

(August 2011) from

the informationcollected from Andhra

Pradesh Industrial

Infrastructure

Corporation Limited

(APIIC) that a lease

deed was executed and

registered in

November 2009 by the

lessor (APIIC) in

favour of a lessee9

for

a period of 21 years with an annual lease rent of` 1,000 per annum per acreand stamp duty of ` 1.74 lakh was paid. Correlation of the registered

documents with related records available with APIIC revealed that the lessee

had paid an upfront amount of` 61.24 crore (at ` 9.00 lakh per acre on 680.55

acres of land), which was not disclosed in the document and on which stamp

duty at the rate of five per centwas also leviable. This resulted in short levy

of stamp duty of ` 3.06 crore due to non-disclosure of facts affecting

chargeability of lease deed.

After we pointed out the case, Government replied (January 2013) that as per

terms and conditions of the lease, only the rent of` 1000 per acre was fixed

and payment of upfront fee was outside the purview of the registered leasedeed. It was also added that as per C&IGs memo

10dated 29 May 2009, the

amount paid in addition to rent reserved was chargeable only in respect ofinstruments of lease for a period exceeding 30 years. The reply is not tenable

as in terms of Article 31(c), duty is chargeable on premium or money

advanced in addition to rent reserved irrespective of the period of lease.

9 M/s Thermal Powertech Corporation India Limited.10 C&IG memo No. S2/2198/2009.

As per Article 31 (c) of Schedule-I A to the IS

Act, where a lease is granted for a fine orpremium or for money advanced in addition to

rent reserved, stamp duty is leviable at five per

centon the market value of the property or the

amount or value of such fine or premium or

advance, set forth in the lease, whichever is

higher, in addition to the stamp duty which

would have been payable on such lease, if no

fine or premium or advance has been paid or

delivered.

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5.11 Short levy of stamp duty and registration fees due to

misclassification of documents

5.11.1 We noticed

(July 2011) duringtest check of the

records of DR,

Hyderabad that a

document styled as

partition deed was

executed and

registered in May

2010 between the

partners of a

partnership firm. It

was recited in thedocument that all

the partners accepted and agreed to divide the property. As the property was

distributed and the partnership ceased to exist, the document is to be treated as

dissolution of partnership and stamp duty is leviable at five per centon the

market value. However, the registering officer levied stamp duty at threeper

centtreating the document as partition and levied stamp duty and registration

fee of` 32.95 lakh instead of` 1.02 crore. Misclassification of dissolution of

partnership as partition deed thus resulted in short levy of stamp duty and

registration fees of` 69.22 lakh.

After we pointed out the case, the registering officer stated (July 2011) that aninstrument between partners dividing the outstanding partnership without

dissolving the partnership is a partition and not dissolution of partnership. The

reply is not tenable as in terms of Section 2 (15) of the IS Act, instrument of

partition means any instrument whereby co-owners of any property divide

or agree to divide any such property in severalty, and includes also a final

order for effecting a partition passed by any revenue authority or any Civil

Court and an award by an arbitrator directing a partition. This clearly applies

to a partition of a property amongst family members and other co-owners.

In the extant case, the partners of a purchasing firm cannot be equated with the

co-owners of the property as per Section 2(15) of the IS Act.

Further, in terms of Section 40 of the Indian Partnership Act, 1932, a firm may

be dissolved with the consent of all the partners. It had been judicially held11

that it was not necessary in every case that the fact of dissolution should be

evidenced by a document; dissolution may be inferred from circumstances of

the case and conduct of the parties. In the present case, the partners were

earlier registered as a firm and due to financial disputes/differences, they have

accepted and agreed to divide the property. It is thus clear that the extant case

11 Rambharusa singh vs Government state of Bihar AIR 1953 (pat 271).

According to Article 41 C of Schedule 1-A to the

IS Act, where the property which belonged to one

partner or partners when the partnership

commenced is distributed or allotted or given to

another partner or partners in case of dissolution

of partnership, stamp duty is leviable at five per

cent on the market value of the property

distributed or allotted or given to the partner or

partners under the instrument of dissolution in

addition to the duty which would have been

chargeable on such dissolution if such property

had not been distributed or allotted or given.

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is a dissolution of partnership and not a partition of a property amongst its co-

owners.

We referred the matter to the Department in November 2011 and to the

Government in June 2012; their reply has not been received (Janaury 2013).

5.11.2 We noticed (May

2011) during test check of

the records of SR, Bhongir

that a gift settlement deed

was executed in June 2010,

settling the property by the

Managing Directors of two

companies in favour of the

Managing Director of

another company. The

registering officer levied

stamp duty of one per cent

applicable to settlement

deed in favour of family members instead of at six per cent applicable to

settlement deed in favour of other than family members, even though the gift

deed was registered in the capacity of Managing Director of the company and

falls outside the ambit of the definition of the term 'family' for the purpose of

this Article. This resulted in short levy of stamp duty of` 5.69 lakh.

After we pointed out the case, the Government accepted (January 2013) the

audit observation and stated that instructions were issued to the District

Registrar, Nalgonda to collect the deficit amount of stamp duty.

5.12 Short levy of stamp duty and registration fee due to

undervaluation of property

We noticed (June 2010 and

October 2011) during test check of

the sale documents of two Sub

Registries (SRs)12

that two

documents styled as sale deed/

agreement of sale-cum-GeneralPower of Attorney (GPA) were

executed in June 2009 and January

2010 respectively by the vendors in favour of the vendee/GPA holder. The

registering officer, while registering the document, adopted the

agricultural/acreage rate instead of square yard rate even though the land was

already converted into non-agricultural land. Thus, undervaluation of

properties resulted in short levy of stamp duty and registration fees of

` 46.11 lakh.

12 Bheemunipatnam and Gopalapatnam.

As per Article 49 A of Schedule I-A to the

IS Act, Settlement in favour of family

members is chargeable to stamp duty at

one per cent on the market value of

property and Settlement in favour of

others is chargeable at six per cent. For

this purpose family means father,

mother, husband, wife, brother, sister, son,

daughter and includes grandfather,

grandmother, grandchild, adoptive fatheror mother, adopted son or daughter.

As per Article 47-A of Schedule 1-A

to the IS Act, instruments of sale are

chargeable to stamp duty on the

amount or value expressed in the

instrument or the market value of the

property, whichever is higher.

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After we pointed out the cases, Government replied (January 2013) in respect

of SR, Gopalapatnam that the issue of applying for permission to construct the

houses cannot alter the nature of the land to non-agriculture unless the land is

actually developed and developed as sites or the said property was sold and

registered adopting sq.yard rate previously. It was also clarified that in the

memo13

dated 5 March 2009, that sq.yard rate applicable for developed housesites could not be fixed merely because the party was planning to build houses

in the land at a later date. The reply is not acceptable, since notice was already

issued by the Revenue Department in 2009 and conversion fee was paid by the

developer in July 2010. Further, as per Section 6 of AP Agricultural Land

(Conversion for non-agricultural purpose) Act, 2006 where lands already have

been converted without obtaining the permission, the land shall be deemed to

have been converted into non-agricultural purpose and upon such deemed

conversion, fine is leviable. Therefore, the date of effect of conversion is the

date on which the notice had been issued by the Revenue Department, after

detecting the same.

The Sub Registrar, Bheemunipatnam stated (June 2010) that only the tentative

layout was approved and the land was not developed. The reply is not tenable

as the layout of the schedule property was approved by Visakhapatnam Urban

Development Authority (VUDA) as far back as in 2007 and the same was not

disclosed in the document. Further, since the land was converted from

agricultural to non-agricultural purposes, square yard rate was applicable.

Governments reply in respect of SR, Bheemunipatnam has not been received.

5.13 Short levy of stamp duty and registration fees on sale deed

We noticed (May 2011)

during test check of the

records of the SR,

Bodhan, that a sale deed

was presented by the

Official Liquidator, High

Court of AP, for

registration on behalf of

the vendor in favour of

the vendee conveying

land together withbuildings and plant and

machinery for ` 8.24 crore. While registering the document the registering

officer levied stamp duty and registration fee of` 3.93 lakh only on land value

(` 41.32 lakh), leaving out the value of buildings, plant and machinery

mentioned in the sale deed. This resulted in short levy of stamp duty and

registration fees of` 29.89 lakh.

13 Memo No.MV3/15056/2008.

As per the Commissioner and Inspector

General (R&S) Circular Memo (No. MV3/

16180/2004 dated 20 March 2010) in the

light of the judgment of the Honourable High

Court of AP (W.A. 1455/2004), where the

properties are acquired in public auction and

the rate is fixed by the Government/

Tribunals/Courts, such rate should be taken

for the purpose of chargeability of the

document.

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After we pointed out the case, Government accepted (January 2013) the audit

observation and directed DR, Nizamabad to collect the deficit amount.

5.14 Short levy of stamp duty on Development Agreement/Development

Agreement-cum-GPA

5.14.1 Short levy due to suppression of facts

We noticed (December 2011) during test check of records of SR, Marredpally

that a document styled as Development Agreement-cum-GPA was registered

in September 2010 by the landowners in favour of the developers for

development of land into residential flats. The property was agreed to be

shared in the ratio of 40 per cent to the land owners and 60 per cent to the

builders and developers. The proposed built up area as stated in the document

was approximately 20,000 sq. ft.

Cross verification with the partition deed executed by the landowners in

October 2010 revealed that 40 per centof the share of the property allotted to

the landowners constituted 84,208 sq. feet. However, the proposed area of

construction was suppressed in the Development Agreement cum GPA.

Stamp duty leviable at oneper centon the estimated market value of land and

complete construction to be made worked out to ` 26.88 lakh, as against

` 15.71 lakh levied. This resulted in short levy of stamp duty of` 11.17 lakh.

Further, penalty under Section 41(A) is also leviable as the proposed area of

construction was suppressed in the document, despite the fact that the plan

was approved by the municipal authorities in June 2010 itself.

After we pointed out the case, Government reported (January 2013) remittance

(November 2012) of` 6 lakh.

As per Article 6(B) of Schedule I-A to the IS Act, read with Government

Order (G.O.Ms.No.1481 Revenue (Registration I) Department) dated 30

November 2007 effective from 03 December 2007, in respect of

documents relating to agreement for construction/development or sale of

immovable properties combined with GPA, stamp duty is chargeable at

one per cent on the sale consideration shown in the document or the

market value of the property as per the market value guidelines or the

estimated market value for land and complete construction made or to be

made in accordance with the schedule of rates approved by

Commissioner and Inspector General of Stamps, whichever is higher.

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5.14.2 Short levy due to non inclusion of land/structure cost

5.14.2.1 We noticed (September 2011) during test check of the records of DR,

Anantapur that a document styled as Development Agreement-cum-GPA

was executed and registered in February/March 2011 by the land owner in

favour of the developer for development of 18.15 acres of land into a projectcomprising residential buildings. The proposed area of construction was

declared by the parties as 99,201 sq.ft. in the document for the purpose of

chargeability of stamp duty. As per the terms of the agreement, the owners

were entitled to 50.8per centin the area and remaining 49.2per centwould be

the entitlement of the developer. The owners share of the area had been

worked out to 1,26,964.27 sq.ft and proportionate share of the developer was

estimated at 1,22,964.27 sq.ft. Accordingly, the total proposed structure

worked out to 2,49,929.66 sq.ft valuing ` 13.75 crore as per the market value

guidelines. Stamp duty was to be levied at oneper centon the value of land

and complete construction to be made. However, the registering officer levied

stamp duty of` 9.64 lakh instead of` 20.77 lakh, resulting in short levy ofstamp duty of` 11.13 lakh.

After we pointed out the case, Government accepted (January 2013) the audit

observation in so far as extent of land computed by the registering authority is

concerned. As regards the structure, it was stated that the developer and

owners mutually agreed to construct the buildings in the land share earmarked

to owners only. But in the share earmarked to the developer, no constructions

would be immediately undertaken. The reply of the Government is not correct

as stamp duty is leviable on the entire area proposed to be developed/

constructed, irrespective of the fact whether construction in developers share

is immediately under taken or not. Further, it is also evidenced by thedocuments that the developers had sold out their share of land and permission

to construct villas had been obtained.

5.14.2.2 We noticed (between July 2009 and May 2011) during test check of

records of the three DRs14

and SR, Kukatpally that four documents styled as

Development Agreement/Development Agreement-cum-GPA were

registered between April 2008 and August 2010 by the land owners in favour

of the developers for development of land into residential plots/flats. Stamp

duty of` 13.33 lakh at oneper centon the estimated market value of land andcomplete construction to be made was leviable. However, the registering

officers levied stamp duty of` 7.34 lakh only by ignoring cost of the land/part

of structure in three documents, and in the other document, stamp duty of

` 20,000 only was levied. This resulted in short levy of stamp duty of

` 5.99 lakh.

14 Rangareddy (East), Medak and Nalgonda.

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After we pointed out the cases, the Government replied (January 2013) that an

amount of`1.62 lakh was collected and remitted (January and April 2011)into Government account in respect of DR Nalgonda. The Governments

replies in respect of the remaining registering officers have not been received

(Janaury 2013).

5.15 Short levy of stamp duty due to incorrect exemption

We noticed (April 2011)

during test check of the

sale deeds of SR,

Kamareddy that the

registering officer did not

levy stamp duty of five

per cent on eight sale

deeds registered after

December 2010 in casesof flats measuring less

than 1,200 sq.ft. Thus,

incorrect exemption of

stamp duty resulted in

short levy of stamp duty

of` 5.13 lakh.

After we pointed out the cases, Government accepted (January 2013) the audit

observation and directed District Registrar, Nizamabad to collect the deficit

amount.

As per Article 47-A (d) of Schedule 1-A to

the IS Act, stamp duty of five per cent is

payable on the sale deeds in respect of

residential flats/apartments. The

Government of AP by an order (G.O.Ms.

No.1 Revenue (regn. II) Department) dated

01 January 2009, exempted stamp duty on

the registration of flats/apartments includingsemi finished structures admeasuring plinth

area of less than 1,200 square feet. The

exemption was applicable from 01 January

2009 to 31 December 2010.

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